This paper presents a microfounded theory of long-term development. We model the interplay between economic variables, namely the process of human capital formation and technological progress, and the biological constraint of finite lifetime expectancy. All these processes affect each other and are endogenously determined. The model is analytically solved and simulated for illustrative purposes. The resulting dynamics reproduce a long period of stagnant growth as well as an endogenous and rapid transition to a situation characterized by permanent growth. This transition can be interpreted as industrial revolution. Historical and empirical evidence is discussed and shown to be in line with the predictions of the model. JEL-classification: E10, J10, O10, O40, O41 Keywords: Long-term development, endogenous life expectancy, heterogeneous human capital, technological change, industrial revolution ∗ The authors would like to thank Giuseppe Bertola, Antonio Ciccone, Adriana Kugler, Matthias Messner, Omar Licandro and Nicola Pavoni, as well as seminar participants at

This paper challenges conventional wisdom by arguing that greater longevity may have contributed less than previously thought for the significant accumulation of human capital during the transition from stagnation to growth. This is because when parents make choices over the quantity and quality of their offspring, greater longevity positively affects not only the returns to quality but also the returns to quantity. The theory suggests that in contrast to longevity, improvements in health are more likely to generate quantityquality tradeoff. Finally, it shows the importance of controlling for fertility when empirically examining the impact of children’s health on their education.

Special thanks go to the staff of the Central Bureau of Statistics in Jerusalem, without whose assistance this project would not have been possible. We also thank the participants at the 2005 NBER Summer Institute for helpful comments, and Oded Galor, Omer Moav, Shaul Lach, Yaacov Ritov, Avi Simchon, and David Weil for many helpful discussions along the way. New Evidence on the Causal Link between the Quantity and Quality of Children A longstanding question in the economics of the family is the relationship between sibship size and subsequent human capital formation and economic welfare. If there is a “quantity-quality trade-off, ” then policies that discourage large families should lead to increased human capital, higher earnings, and, at the macro level, promote economic development. Regression estimates and a large theoretical literature suggest this is indeed the case. This paper provides new evidence on the child-quantity/child-quality trade-off. Our empirical strategy exploits exogenous variation in family size due to twin births and preferences for a mixed sibling-sex composition, as well as ethnic differences in the effects of these variables. We use these sources of variation to look at the causal effect of family size on completed educational attainment, fertility, and earnings. For the purposes of this analysis, we constructed a unique matched data set linking Israeli Census data with information on the demographic structure of families drawn from a population registry. Consistent with other recent findings in this area, our results show no evidence of a quantity-quality trade-off, though there is some evidence that first-born girls from large families marry sooner.

Conventional wisdom suggests that increased life expectancy had a key role in caus-ing a rise in investment in human capital. I incorporate the retirement decision into a version of Ben-Porath’s (1967) model and find that a necessary condition for this causal relationship to hold is that increased life expectancy will also increase lifetime labor supply. I then show that this condition does not hold for American men born between

In this chapter we revisit the relationship between income and fertility. There is overwhelming empirical evidence that fertility is negatively related to income in most countries at most times. Several theories have been pro-posed in the literature to explain this somewhat puzzling fact. The most common one is based on the opportunity cost of time being higher for in-dividuals with higher earnings. Alternatively, people might differ in their desire to procreate and accordingly some people invest more in children and less in market-specific human capital and thus have lower earnings. We re-visit these and other possible explanations. We find that these theories are not as robust as is commonly believed. That is, several special assumptions are needed to generate the negative relationship. Not all assumptions are equally plausible. Such findings will be useful to distinguish alternative the-ories. We conclude that further research along these lines is needed. ∗We thank Todd Schoellman, John Knowles, and the participants at the NBER pre-conference

An electronic version of the paper may be downloaded • from the SSRN website: www.SSRN.com • from the RePEc website: www.RePEc.org • from the CESifo website: Twww.CESifo-group.org/wp T CESifo Working Paper No. 2775

We construct a dynamic general equilibrium model with endogenous policy choice to analyze the adoption of child labor laws. The key mechanism in our model is that parents ’ decisions on family size interact with their preferences for child labor regulation. If policies are endogenous, multiple steady states with different child labor policies can exist. Consistent with empirical evidence, the model predicts a positive correlation between child labor, fertility, and inequality. In addition, the theory implies that the political support for regulation should increase if a rising skill premium induces parents to choose smaller families. The model replicates features of the history of the U.K. in the nineteenth century, when regulations were introduced after a period of rising wage inequality, and coincided with rapidly declining fertility rates and an expansion of education. An earlier version of this paper was presented under the title “Voting with Your Children:

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We study in this paper the effect of mother‟s education on fertility and the schooling of children. We base our evidence on a natural experiment that increased sharply the education of affected cohorts of girls, but not of boys, as a result of the de facto revocation in October 1963 of the Military Government of Arabs in Israel which immediately eased for large part of the Arab population access to schooling institutions. The Military Government which was in effect from 1948 imposed severe restrictions on movement and travel and therefore disrupted access to schooling of residents in localities that lacked education institutions. The change in access to schools increased female years of schooling by 1.02 for women age 4-8 in 1964 and by 0.58 for women age 9-13 at that time while not effects boys education attainment. These very large effects on schooling levels led to a sharp decline in completed fertility, 0.61 children for the younger affected cohorts and of 0.47 children for the older cohorts. The implied 2SLS estimates show that an increase in one year of maternal schooling caused a decline in fertility of 0.5-0.6 children for the younger cohorts. Additional evidence that we present suggests that labor force participation, age when married, marriage and divorce rates as well as spouse's labor force participation and earnings did not play any role in this fertility decline. However, spouse's education increased sharply as well through assortative matching, therefore playing as well a role in the declining fertility. We also estimate that the increase in mother's schooling led as well to an increase in the education of children. The increase in schooling of children amounted to just over a third of the increase in schooling of their mothers.

Conventional wisdom suggests that in developed countries income and fertility are negatively correlated. We present new evidence that between 2001 and 2009 the cross-sectional relationship between fertility and women’s education in the U.S. is U-shaped. At the same time, average hours worked increase monotonically with women’s education. This pattern is true for all women and mothers to newborns regardless of marital status. In this paper, we advance the marketization hypothesis for explaining the positive correlation between fertility and female labor supply along the educational gradient. In our model, raising children and home-making require parents ’ time, which could be substituted by services bought in the market such as babysitting and housekeeping. Highly educated women substitute a significant part of their own time for market services to raise children and run their households, which enables them to have more children and work longer hours.